MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, FEBRUARY 10, 1998 (3)
OIL & GAS
NYMEX
Crude Oil
Oil prices closed mostly lower Tuesday for a third straight day as the market grew weary of potential military action in the oil-rich Middle East Gulf and focused instead on supply fundamentals.
At the New York Mercantile Exchange, crude oil for March delivery closed 20 cents a barrel lower at $16.43.
"The Iraq crisis has been placed on the back burner and commercials are instead hedging on the short side with West African crude headed away from Asia to the U.S.," said Jim Ritterbusch, trader with Sweeney Oil in Illinois.
Asia is finding dollar-denominated crude expensive due to the region's currency crisis. So imports that it cannot afford are arriving on U.S. shores, swelling already abundant supply.
Traders were inclined again to ignore minor shifts in the Iraq-United Nations standoff over weapons inspections until a definitive diplomatic or military step is made clear.
On Tuesday, U.S. President Bill Clinton repeated that the United States is prepared to launch a military strike against Iraq if President Saddam Hussein does not comply with U.N. weapons inspections.
Canada and Australia said they would offer military support if diplomatic efforts to settle the standoff failed and the United States, which already has British and German backing, unleashes the powerful force it has assembled in the Gulf.
Meanwhile, there is no shortage of oil on world markets, with or without Iraq.
Dealers expected weekly U.S. oil inventory data from the American Petroleum Institute to show a build of up to 3 million barrels in crude oil stocks last week. After the close of trading, the institute reported that crude stocks rose by 4.95 million barrels during the week.
With the market's attention turned to fundamentals, March gasoline bucked declines in crude and heating oil and ended 0.28 cent higher at 51.13 cents a gallon. March heating oil ended 0.51 cent a gallon lower at 45.44 cents.
Gasoline futures tracked gains made in the U.S. Gulf gasoline cash market amid talk of scheduled maintenance by Koch Oil's Corpus Christi, Texas, refinery and Clark Oil's Blue Island refinery in Illinois. Gasoline output has already been reduced by a rash of winter maintenance by other refiners.
Natural Gas
Natural gas futures ended mixed Tuesday in a moderate session, with front months lifted by some technical buying and short covering despite softer physical prices and bearish weather forecasts, sources said.
March climbed 4.7 cents to close at $2.268 per million British thermal units after holding just above support on ACCESS at $2.205. April settled 4.6 cents higher at $2.30. Other months ended mixed, with some year 2000 contracts finishing down slightly.
"The commodity funds supported it early and strategically throughout the day. We should have tested support because cash was weak," said one Midwest trader, noting forecasts for the next week or so were not supportive.
Forecasts still call for above-normal temperatures across the U.S. this week, with levels in the Midwest expected to warm to 10-20 degrees F above normal.
Early withdrawal estimates for tomorrow's weekly inventory report range widely from 40 bcf to 170 bcf, with most falling in the 100-135 bcf area. For the same week last year, stocks fell 75 bcf.
Chart traders noted March on ACCESS held just above key support at $2.18 and failed during the day session to dip below unchanged, a factor that helped trigger some early technical buying. They pegged next support in the $2.03 area. Minor resistance was expected at Monday's $2.32-2.35 gap, with major selling expected at the recent high of $2.435 and then in the $2.50 area. Further resistance was pegged at prominent highs in the low-$2.70s.
"People don't want to be short in front of the AGA (stock) number tomorrow in case of an upside surprise, but there's no weather, and I still don't like the front of the board," said one New York-based trader, noting March on ACCESS held above technical support.
In the cash Tuesday, Gulf Coast swing quotes slipped a few cents to the $2.14-2.19 area. Midcon pipes were off about a nickel to $2.06-2.11. Chicago city gate gas was about five cents lower in the low-$2.20s, while New York fell almost a dime to the high-$2.30s.
The NYMEX 12-month Henry Hub strip firmed 3.7 cents to $2.408. NYMEX said an estimated 42,794 Hub contracts traded, down from Monday's revised tally of 68,676.
CANADA SPOT GAS
Canadian spot natural gas prices softened again on Tuesday as mild weather continued to put a lid on demand, traders said.
Spot gas at the AECO storage hub in Alberta was quoted at C$1.64-1.65 per gigajoule (GJ), off one cent from Monday.
"They're injecting some gas into storage today," one Calgary-based trader said, noting the slight premium in price in March and July/August at C$1.66 was attracting some buyers to purchase day gas and sell in March.
Forecasts in southern Alberta are calling for a high of about 33 degrees Fahrenheit (zero to one degree Celsius) on Wednesday and a high of 39 degrees F on Thursday.
At Sumas, Wash., spot gas prices were still on a gradual decline as sellers continued to outnumber buyers. Traders blamed the softening on ample storage supplies and mild weather. Deals were reported done in the mid-to-high US$1.20s per million British thermal units (mmBtu), down about four cents from Monday.
Temperatures in the U.S. Northwest were expected to remain normal to slightly above normal through this week.
Taking a look ahead at next month's market at Sumas, one trader said, "There are sellers coming out of the woodwork for March."
In the East, gas at Niagara was quoted at US$2.35-2.36 per mmBtu, off one cent, as forecasters called for a high of about 40 degrees F over the next few days in the region.
U.S. SPOT GAS
U.S. spot natural gas prices continued to trade lower on Tuesday, ladened by much-above-normal temperatures across many parts of the U.S., industry sources said.
Weather Services Corp (WSC) forecasts were still calling for above-normal temperatures throughout most of the U.S. this week, with the warmest weather expected to cover the central third of the nation.
Swing gas at Henry Hub was quoted mostly at $2.17-2.19 per mmBtu, indicating a loss of about seven cents from Monday.
South Texas prices were similarly softer at $2.05-2.12, while in the west, Permian prices eased another four cents to about $2.
At the southern California border, prices fell four cents to $2.16-2.20, while San Juan prices were quoted softer at $1.98-2.03.
In generation news, restart of the 498 megawatt (MW) unit 4 at the San Juan coal plant in New Mexico was delayed to late Wednesday or early Thursday after being shut over the weekend for tube leak repairs. The adjacent 316 MW unit 1 was taken off line as planned late Friday for about three weeks of maintenance.
Also in New Mexico, a 220 MW unit at the Four Corners coal plant was shut Monday because of a tube leak. No restart date was set.
Meanwhile in the Midcontinent, prices lost another five cents to $2.07-2.10, with Chicago city-gate quoted mostly in the low-$2.20s.
In the East, New York city gate prices were quoted mostly in the high-$2.30s to about $2.40, while Appalachian prices on Columbia slipped further to about $2.25-2.27.
OIL & GAS PRICE REFERENCES
Charts:
oilworld.com
oilworld.com
NYMEX Reference:
quotewatch.com |
